Iran’s grand re-entry

The 1979 revolution turned Iran into a pariah state. Virtually cut off from the entire world and left to fend for itself, the country went through some difficult times. Now, after years of negotiations, Iran has re-entered the world stage.

The thing to note, though, is that this is no ordinary entry. It’s a grand re-entry. This can be easily gauged by the events that unfolded within the first 10 days of the end of the sanctions on iran. Iran’s re-entry onto the world stage was expected by almost all who were following the tedious and protracted negotiations between Western nations and Iran over the latter’s nuclear programme. But the speed at which the first 10 days of the end of sanctions yielded such massive deals surprised quite a few. What’s behind this hurry? And what does Iran have to offer?

Within the first 10 days, Iran signed mammoth trade and business agreements with China, Italy and France. The Chinese president, along with an entourage of ministers and leading Chinese businessmen, was the first dignitary to land in Tehran. His trip resulted in a $600 billion trade agreement, spanning over a decade. Then it was the Iranian president’s turn to visit Italy and France. The visit to these countries also resulted in trade and business agreements worth billions of dollars.

With 80 million people, Iran represents a huge consumer market that will suddenly open up to the outside world. Therefore, this is too good an opportunity to miss. This is not just a guesstimate. While the negotiations over the nuclear deal were going on, savvy Western businessmen were making trips to Tehran in order to gauge the potential of the Iranian market. The spate of hurriedly signed agreements is a reflection of the fact that the businessmen must have found a huge potential. One western diplomat termed Iran as a ‘goldmine’. The British foreign secretary expressed his hope that British businesses will ‘seize’ these opportunities.

The lifting of sanctions implies Iran’s access to billions of dollars that were frozen since the revolution. It is highly unlikely that Iran will hoard this amount. What is more likely is that it will spend it on buying equipment from international market. It has already made it clear, for example, that it intends to buy at least 100 passenger planes for its official airline. Iran’s need is a multi-billion dollar opportunity for European aircraft manufacturers like Airbus.

Moreover, another important aspect of Europe’s eagerness to trade comes in the form of energy. About a third of Europe’s oil and gas needs are met by Russia, which in turn gives Russia leverage in dealing with the EU. With ties strained due to Russian actions in Crimea and Syria, Iran provides a welcome reprieve (as an alternative) from dependence on Russian oil and gas.

The energy aspect comes into play when considering China’s willingness to access the Iranian market. As the second largest economy in the world, its economy needs a constant supply of energy. Iran offers a wonderful opportunity for Chinese companies that are investing billions of dollars worldwide in energy projects. Moreover, Iran’s ports offer easier access (and shorter route) to Europe, and lies along the old silk route that the Chinese are so eager to revive in order to expand their trade.

Perhaps more important, at least from the Chinese point of view, are Iranian ports offering an alternative to Gwadar in case it does not work out as desired. Moreover, aside from these considerations, the global business community is also aware that Iran is in need of upgrading its overall infrastructure. All these bring ample profit opportunities to the table, something that businesses around the globe will be unwise to ignore.

This illustrates an uncomfortable reality (rarely acknowledged openly) about the nature of transactions between nations: if there are profitable opportunities to be had from engaging with a particular country, then other discomforts could be ignored. Don’t forget that this is the same Iran that still sponsors and supports Hezbollah and the Assad regime in Syria, something that led it to incur the wrath of world community (including Italy and France). But now that profitable opportunities beckon for the companies of both these nations, they did not hesitate for a moment to court Iran. In short, economic opportunities trump other concerns, including terrorism.

India is another example that reflects this aspect of foreign policy. Although it never went through the circumstances that Iran had to endure, its human rights abuses are some of the worst in the world. And when it comes to human rights abuses, European nations are the most vociferous in demanding sanctions against the perpetrators of the abuse. Yet India also represents one of the biggest consumer markets in the world, and offers gigantic profit opportunities for businesses. The heads of European states pay regular visits to India to lobby for deals like purchase of fighter jets. The recent visit by the French president was not meant to discuss human rights violations or the growing wave of intolerance under the Modi sarkar, but to sign a billion dollar deal for the sale of French jet fighters.

All this raises a perplexing question. Pakistan is home to more than 180 million people, which is constantly increasing. This in itself represents a market that is double the size of Iran. Yet China is willing to only sign agreements worth $46 billion under the CPEC with us, while it finds little hesitation in signing a $600 billion agreement with Iran. Why? This is a question to which there is no easy answer in the offing.

But one probable reason could be the CPEC. The corridor has been termed a ‘game changer’, but has now morphed into a controversial project with three smaller provinces at loggerheads with Punjab and the central government.

And this is not the first instance in our history that this is happened. In essence, the problem in Pakistan is that it is difficult to get all stakeholders on one page. You can bet that no such confusion exists when the Iranian president signs agreements since global players are sure that his views are the views of all of Iran.

Iran’s example should make us realise the importance of being on one page when dealing with the international community, especially international investors and businessmen.

Published in THE NEWS on Feb 10, 2016